Job gains likely to allay anxiety after a dismal 2 months

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A job fair in Detroit. More jobs were created last month than in the previous two.

By Nelson D. SchwartzNew York Times
March 08, 2014

NEW YORK — The US economy stirred to life last month, creating more jobs than in the previous two winter months and raising hopes that momentum in the labor market would gradually pick up as the cold weather in many parts of the country eases with the arrival of spring.

The report from the Labor Department for February, which came on Friday after job figures for December and January that were much weaker than the underlying trend, eased fear that the economy was downshifting to a slower pace. The data led some experts to conclude that weather, not a fundamental slowdown, was a major factor behind the recent shortfalls.

With employers hiring 175,000 workers, the payroll gain in February was hardly cause for celebration — it was still well short of the pace needed to return the economy to full employment in the next few years. But it was twice the number added in December, when the cold and snow arrived.

“It’s a normalization,” said Julia Coronado, chief economist for North America at BNP Paribas. “It’s not clear just how much effect the weather had, but it seems like we’re on a moderate but steady hiring trend.”

The unemployment rate rose 0.1 percentage point to 6.7 percent, a reversal of the sharp downward trend recorded since last summer. Some experts argued that was not cause for alarm, but rather a sign that more people were moving back into the labor force and searching for jobs as openings increased.

The Labor Department announcement had been awaited eagerly and was viewed as a wild card, with economists struggling to estimate the impact of wintry weather in many parts of the country as well as seasonal adjustments by government statisticians.

Before Friday’s report, the consensus among economists on Wall Street called for employers to have added 149,000 positions in February, with the jobless rate remaining flat at 6.6 percent.

In December, the economy added 84,000 jobs, and in January, it created 129,000 positions. Both numbers fell well short of expectations among experts on Wall Street.

The healthier-than-expected gain in hiring in February is very likely to remove some of the anxiety that has been hanging over the economy because of the weak labor market data in the previous two months, as well as other gloomy signals like a downward revision in the government’s estimate of economic growth late last year and a decidedly mixed holiday shopping season for many retailers.

It is also almost certain to mean the Federal Reserve will stick with its plan to slowly ease back its stimulus efforts when policy makers meet at the end of this month. In December, the Fed announced the scaling back after job gains of more than 200,000 in the fall, only to watch the pace of hiring shrivel.

“In our view, the February employment report signals that the United States has returned to moderate job growth and that better economic data lie ahead once weather effects subside,” said Michael Gapen, senior US economist at Barclays.

On Thursday, William C. Dudley, president of the Federal Reserve Bank of New York, told The Wall Street Journal that the “threshold is pretty high” for a major deviation in the course of reducing its monthly bond purchases, adding that his view of the economy had not been shaken by the weak batch of the data recently. Despite the slow but steady pullback in the stimulus efforts, overall monetary policy, he said on Friday, should remain “highly accommodative” given the uncertainty about just how fast the labor market is improving.

For all the anticipation that preceded Friday’s report, Wall Street’s reaction was muted as tensions in the Ukraine overshadowed the jobs report. The Dow Jones average rose 30.83 points to 16,452.72, while the Standard & Poor’s 500 ticked higher to close at 1,878.04. The Nasdaq Composite fell 15.91 points to 4,336.22.

In February, white-collar professions including accounting, bookkeeping, and consulting led the gains, as the professional and business service sector gained 79,000 jobs. Blue-collar hiring was more muted with the manufacturing sector adding 6,000 positions and construction gaining 15,000. After years of being a headwind on job growth, government hiring helped the figures for February, although all of those increases were at the state and local level. The federal government shed 6,000 jobs.